Telegraph distorts the truth on energy bills

energy, media, personal finances

Author(s):  Will Straw
Published date:  10 May 2012
Source:  Left Foot Forward

The Daily Telegraph has joined the ranks of the Daily Mail and Daily Express in exaggerating the costs of environmental regulations.

An article in today’s paper features the headline ‘£200 a year for green power’. A longer version of the article appeared onlineyesterday.

It claimed:

“Government estimates suggest the new subsidies will put an extra £205 a year on the average household electricity bill over the next 15 years. It has predicted domestic electricity figures will rise from £477 per year to £682 per year by 2026.”

DECC’s Electricity Market Review Impact Assessment (pdf) includes the following table (Figure 18) showing estimates for final average household electricity bills using a central assumption for fossil fuel prices.

Although bills are expected to increase from 2011-15 to 2026-30 this is largely due to increases in wholesale costs, network costs, supplier costs and margins, and VAT.

The carbon price cost (light blue) and EMR support costs (dark green) are expected to rise but by more modest amounts; by contrast, other energy and climate change policy costs (light green) are expected to fall dramatically.

Figure 18:

Average-domestic-electricity-bills-under-EMR-packages-with-strategic-reserve

The Telegraph are more accurate in citing figures from the Committee on Climate Change which show £110 of the expected increase in electricity bills from £1,060 in 2010 to £1,250 in 2020 will be due to environmental policies. But this is assuming there are no further measures to improve energy efficiency which could reduce average bills to £1,050 by 2020 – effectively reversing the increases in both wholesale gas costs and environmental policies.

Meanwhile, there is a considerable downside risk that high gas prices due to increased global demand from countries like China could push up wholesale costs. This would see costs soaring to £1,425 with nothing to do with environmental policies.

This is not to suggest the Energy Bill is flawless. It is not. IPPR’s own research (pdf) has shown the Carbon Price Floor will increase the cost of carbon without a commensurate reduction in carbon emissions. The Energy and Climate Change Select Committee has found (pdf) the ‘contracts for difference’ mechanism is actually unsuitable for supporting renewable generation.

Challenging the government to achieve its legal obligations to reduce carbon emissions at the lowest possible cost is a worthy aim. But the distortion in the Telegraph’s story does little to help us understand how to make this happen.

 
 

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Will Straw, Associate Director for Climate Change, Energy and Transport